Asian shares tentative on lingering geopolitical tensions

Pedestrians walk past at an electronic board showing the stock market indices of various countries outside a brokerage in Tokyo June 2, 2014. REUTERS/Yuya Shino

By Lisa Twaronite

TOKYO (Reuters) - Asian stocks edged up in early trading on Tuesday, though the upside was capped by lingering concerns about the Ukraine crisis and violence in Gaza which pressured U.S. yields and the dollar.

Malaysia has reached an agreement with the leader of the separatist group to retrieve the bodies of the victims from last week's downing of a Malaysia Airlines passenger jet as well as the plane's two black boxes, Malaysian Prime Minister Najib Razak said on Tuesday.

Meanwhile, in the Gaza Strip, the Palestinian death toll jumped to more than 500 and Israeli losses mounted as well, as the United States stepped up efforts to secure a ceasefire.

U.S. shares slumped overnight, as the rising global tensions offset some upbeat U.S. earnings. So far this reporting period, 66 percent of S&P 500 companies have topped Wall Street's profit expectations, according to Thomson Reuters data, above the 63 percent average since 1994.

The three major U.S. indexes ended well off their lows, a sign that some appetite for riskier assets remained. [.N]

MSCI's broadest index of Asia-Pacific shares outside Japan was up slightly in early trade, while Japan's Nikkei stock average rose 0.6 percent.

Lower U.S. Treasury yields continued to weigh on the dollar, as safety-seeking investors bought U.S. government debt.

"Safe havens, including U.S. Treasuries and precious metals such as gold, are benefiting from the situation," strategists at Barclays wrote in a note to clients.

"10-year U.S. Treasury yields have been offering mark-to-market portfolio insurance against geopolitical risk," they said.

The yield on the benchmark 10-year U.S. Treasury note stood at 2.469 percent in Asia, not far from its U.S. close of 2.475 percent.

The yield on the 30-year Treasury bond inched down to 3.262 percent from its U.S. close of 3.264 percent On Monday, when it fell as low as 3.249 percent, the lowest since June 2013.

The dollar was steady on the day against its Japanese counterpart at 101.42 yen, while the euro stood at 137.23 yen, off last Friday's five-month trough of 136.71 yen.

The euro was also steady at $1.3523, pulling away from a five-month low of $1.3491 touched on Friday.

In commodities trading, U.S. oil for August delivery added about 0.1 percent to $104.60 a barrel, bolstered by fears of escalating tension as traders covered positions ahead of the contract's expiration later on Tuesday. [O/R]